QUESTION 2 Banana Bars Company began business on January 1 and immediately issue
ID: 2541173 • Letter: Q
Question
QUESTION 2 Banana Bars Company began business on January 1 and immediately issued 500,000 shares of its $2 par value common stock for $16,000,000. At the end of the year it paid $800,000 in cash dividends. In midyear, the firm bought back some of its own shares. The company reports the following additional information at December 31, 2016: Net income Common stock Retained earnings beginning of year Common shares authorized $4,000,000 $1,000,000 $0 2,000,000 400,000 Shares outstanding at year end a. How much is the Additional Paid-in Capital account at the end of the year? b. Determine the retained earnings amount at the end of the year G. How many shares of stock are in the treasury at the end of the year? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). 3 (12pt)T E EExplanation / Answer
a) Total shares issued = 500,000 shares
Total value of issue = $1,600,000
Par value of issue = 500,000 shares*$2 par = $1,000,0000
Additional paid in capital balance at the year end = Issue value - Par value
= $1,600,000 - $1,000,000 = $600,000
b) Retained Earnings at the end = Opening Balance+Net Income-Cash dividends paid
= $0+$4,000,000-$800,000 = $3,200,000
c) Total shares issued = 500,000
Shares outstanding at the year end = 400,000
Shares in Treasury Stock = Total shares issued - Shares outstanding at the year end
= 500,000 - 400,000 = 100,000 shares